If a Lender Agrees to Lend a Firm $1,000,000 After

question 39

Multiple Choice

If a lender agrees to lend a firm $1,000,000 after six months at the going rate, that individual can hedge against the loss from a decline in interest rates by

• A) ​buying a financial futures contract
• B) ​selling a financial futures contract
• C) ​taking a short position
• D) ​making the loan now

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Definitions:

Depreciation

The reduction in the value of an asset over time, due in particular to wear and tear, typically used for tax and accounting purposes.

Noncash Charge

An expense reported in the income statement of a company that does not involve actual cash flow, such as depreciation or amortization.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, used for managing liquidity and ensuring financial stability.

Accounts Receivable Turnover

A financial metric that measures how efficiently a company collects revenue from its credit sales by dividing net credit sales by average accounts receivable.